Stock markets cautious ahead of UK Covid lockdown exit plan – business live

It looks like deferred payments to pension funds may be something of a theme for hard-pressed sectors that have been forced to suspend their operations: British Airways is also at it, it announced today.

The airline, a subsidiary of International Airlines Group (IAG), has reached agreement with one of its pension funds to defer £450m of pension deficit contributions due between October 2020 and September 2021 as it tries to conserve cash.

The trustee of New Airways Pension Scheme (NAPS) agreed that the airline could defer monthly payments of £37.5m. In return BA will pay interest on the deferred cash and put up property assets as security.

BA will also pause dividend payments to IAG until at least the end of 2023, when its pension deficit is expected to be closed.

The prospects for UK-focused airlines are not good, given government messaging that suggests that foreign travel is unlikely to return any time soon. That is unlikely to be the case at least until other countries catch up with the UK’s vaccination efforts.

A bidding battle for G4S, the outsourcing company, has fizzled out after Canadian security company GardaWorld said on Monday that it will not raise its bid from the 235p offered in December.

Garda’s retreat leaves the way open for rival bidder Allied Universal, which offered 245p per share. The UK’s Takeover Panel had pushed the bidders into an auction situation to decide the best bid, but Garda did not force Allied to respond.

However, Garda did deliver a parting shot to G4S, saying it would not pay too much for a company with scandals “that continue to come to light” – possibly a reference to the Guardian’s revelations in January of allegedly illegal recruitment fees charged to workers, as well as previous allegations of practices of forced labour.

Stephan Crétier, GardaWorld’s boss (he lists himself as “founder, chairman, president and chief executive”), said:

There can be no better owner for G4S than GardaWorld, but we are disciplined buyers and we will not overpay for a company with systemic ESG issues that continue to come to light.

In light of the above, we have concluded that priced above 235 pence per share, there are better and less risky opportunities available to GardaWorld.

One key stock to watch later will be Boeing, which is facing yet another problem, this time with its older 777 planes.

Boeing late on Sunday night said airlines using one type of Pratt & Wihtney engine should ground them until they can be inspected, after one plane was forced to make an emergency landing after engine parts dropped off in mid-air (see picture).

The US aircraft maker has already endured the worst period in its history after two deadly crashes were blamed partly on its failures. The consequent grounding of its bestselling 737 Max plane came before the coronavirus pandemic caused cash-strapped airlines around the world to cancel orders for new planes.

You can read the full story on the 777 grounding here:

As expected it’s a drab start for European equities: the FTSE 100 has lost 0.6%.

The Stoxx 50 index tracking Europe’s largest stocks is down 0.2%, while US equity futures – looking ahead to this afternoon – have also dipped.

Good morning, and welcome to our live coverage of economics, business and financial markets.

Stock markets have surged during the past year as central banks and governments have pumped in stimulus. Now thoughts are turning to whether that rally can continue, as hints of inflation suggest that central banks may be tempted to tap the brakes.

Futures indicate that the FTSE 100 is likely to endure a bumpy start to the week ahead of Prime Minister Boris Johnson announcing more details of the plans to ease restrictions on the UK economy.

The FTSE 100 was expected to follow in the footsteps for the most part of Asian markets outside Japan. The Shanghai stock exchange composite lost 1.5%, while the 300 biggest stocks across both Shanghai and Shenzhen lost 3.4%. Shares were also down in Hong Kong and Korea.

IG Group, an investment platform, explained in its morning note:

Chief amongst the current concerns appears to be the rise in Treasury yields, with a recent resurgence in fixed income returns providing less reason to believe that equities are the only area to invest. […] With commodities on the rise, we have yet another reminder of the potential rise in inflation that many believe could bring an earlier end to the current loose monetary policy environment.

It’s a complicated picture, particularly as the vaccination effort suggests divergences between countries will rise in the short term. A case in point: in the UK the pound has set a new three-year high mark against the US dollar on Monday morning: one pound was worth $1.4051, before it retreated slightly.

Sterling hit the $1.40 mark for the first time in three years on Friday. It is one of the best-performing major global currencies this year in part because of the removal of Brexit risks and also because of the UK’s rapid pace of vaccinations, analysts have said.

Some economists believe the fast pace of vaccinations – 17.6m adults have had a first dose up to 20 February, almost a third of the total expected – could help the UK economy to recover faster than some others.

And we have more to come this morning on:

• Boeing, which has suffered issues with its 777 planes, the latest blow even as its 737 Max gets back in the air.
• British Airways, which has delayed pension payments of £450m so that it can conserve cash until the airline business is able to restart properly.
• Mitchells & Butlers, which reported a big slump in sales – hardly unexpected as its pubs and restaurants closed.

The agenda

• 9am GMT: Germany Ifo business climate index (February; previous: 90.1; consensus: 90.5)
• 1:30pm GMT: US Chicago Fed national activity index (January; prev.: 0.52)
• 2:30pm GMT: European Central Bank’s Christine Lagarde speech